Road Warrior

Reflections on 2013

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When the major news networks like CNN, Bloomberg, and CNBC start calling me for interviews on farm and agricultural conditions, you know that change is coming in the agricultural industry. Looking back five years from now on 2013 might indicate that this was a pivotal year for change in the economics of agriculture. The emails I receive and the look in people’s eyes at industry events suggest anxiety about the future, but not necessarily gloom and doom. It is very encouraging to see groups of lifelong learners at these events who want to be informed so that they can be proactive managers in the changing cycles.

It is amazing that 2013 had all the hype of strong corn and soybean prices early on, but recently we have seen the air come out of the economic balloon with $4.00 per bushel corn and some suggesting $2.70 per bushel corn. The lesson now being learned by those without a proactive risk management program and forward pricing is that negative margins can quickly arise, which, if sustained, can quickly burn through working capital and equity. Will 2013 be the start of the moderation and end of the great commodity super cycle? On the bright side, the livestock industry finds people with a newfound energy as prices and reduced costs are suggesting some favorable economic times ahead for them.

The year 2013 has seen a slowdown in growth of the emerging nations and softening of the ethanol and biofuel mandates. A close watch of weather conditions in the southern hemisphere along with Federal Reserve action may foretell the future direction of profits, prosperity and wealth on U.S. farm balance sheets.

Turning to land values, they are very regionally and locally determined. In my travels discussions concerning “no sales,” fewer bidders at auctions, and actually some reduction in cash rents in certain areas are signs of behavioral change in this aspect of the profit equation and the balance sheet. Wealth preservation versus wealth accumulation of the past few years may be in order as 2013 comes to a close.

The general economy in the United States has made a modest comeback despite inaction in Washington, D.C. The year 2013 will go down as the year in which the U.S. moved toward energy independence, which is primarily on the shoulders of agriculture and rural regions.

In 2013 I have noticed a trend involving strategic alignment among producers, suppliers, and lenders. Each is seeking quality people and businesses to plug into their successful business model.

In traveling North America, the convergence of biotechnology, information technology and engineering technology is playing out in crops, livestock and other agricultural sectors. Soybeans are now being grown in Western Canada with high yields. Despite challenging planting conditions, I have seen uniform crops out the windshield of my Hertz rental car, and producers and other leading agriculture industry experts are discussing how technology has aided this sector.

A continued favorable trend of 2013 is the youth movement in agriculture. At recent seminars and events, well over half of the attendees have been under forty years of age. The energy and new ideas are welcomed, but one hopes they will heed the advice of senior generations who have experienced the downturn of the 1980s, particularly if we go into some tough economic times.

Overall, 2013 travels took me to 37 states, Canada and Mexico, and it has been a rewarding and gratifying year for me. Interacting with thousands of producers, lenders, agribusinesses, educators, and others this year with a passion to make agriculture better assures me that the future of agriculture is in capable hands. Our team wishes you wish you a blessed New Year! I hope to see many of you in my travels in 2014.

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What's Road Warrior?

Dave Kohl is an ag economist specializing in business management and ag finance. He can be reached at sullylab@vt.edu.

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